I personnally find it much easier to use inDesign to just produce a PDF document that is specifically formatted for the PRS505. Yes, it means the doc might not show properly on other readers (although screen sizes are similar enough on most models), and I can't change the size of the font (I just choose the one I am most comfortable with) but the results are perfect, dropped caps and everything, for a minimal amount of work.
I WOULD produce ePubs instead if only the workflow was as easy. I usually start with text or rtf files, and just breaking down the book in several files, one per chapter, is a real hassle. Not to mention about setting all the styles...
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